https://sputnikglobe.com/20230725/us-regulator-accuses-lenders-of-fiddling-with-deposit-data-after-banking-collapse-close-call-1112126430.html
US Regulator Accuses Lenders of Fiddling With Deposit Data After Banking Collapse Close Call
US Regulator Accuses Lenders of Fiddling With Deposit Data After Banking Collapse Close Call
Sputnik International
The US banking sector had a close brush with collapse earlier this year, with three commercial lenders going under after interest rate hikes by the Federal Reserve left many smaller banks on the brink of insolvency. Over the same period, banking giants like JPMorgan Chase netted a cool $49 billion in earnings by jacking up base lending rates.
2023-07-25T08:54+0000
2023-07-25T08:54+0000
2023-07-25T09:10+0000
economy
federal reserve
bank of america
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crisis
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The Federal Deposit Insurance Corporation (FDIC) has accused US banks of fiddling with deposit data to lower the amount they would have to pay under a new special tax proposed in the wake of this spring’s banking collapse close call.In a letter to the CEOs of major lending institutions on Monday, the regulator said it had “observed that some depository institutions” had “incorrectly” lowered the value of uninsured deposits – that is, deposits above the $250,000 which the FDIC automatically guarantees to return to bank clients if the financial institution goes bust. An estimated 56 percent of all deposits in the US are above this $250,000 figure.The FDIC believes some banks may have tampered with deposit data in a bid to reduce how much they would owe in the special assessment on “systemic risk determination” proposed in May.Analysts with S&P Global, a New York-based financial information and analytics firm, have said that “an unusually large number” of major lenders appear to have amended their financial statements to reduce the amounts they would owe the FDIC by tens or even hundreds of millions of dollars, with some banks refiling their year-end financial statements to reduce uninsured deposit amounts.At least 55 banks have reportedly restated their fourth-quarter 2022 data, compared with 14 a year earlier, with Bank of America amending its uninsured deposits figures by a whopping $125 billion, which would drop its special assessment payment from $2.26 billion to $1.95 billion. Smaller lenders like Huntington National Bank cut their uninsured deposit data by over $50 billion, a move that would save the lender $85 million in the assessment.The FDIC has urged banks to adjust their financial statements, and demanded that bank executives personally confirm the accuracy of their filings. However, the FDIC did not single out any particular bank, and it’s unclear whether the open letter can be followed up by any legal action.The open letter to banks comes amid reports late last week citing Fed data that some $78 billion had been funneled out of the accounts of major banks between July 5 and 12 as lenders put cash into third-party intermediaries in a bid to attract new deposits.The US banking system was rocked by a major close call in March, with California-based business lender Silicon Valley Bank collapsing as depositors rushed to get their money out after the bank was forced to sell its Treasury bond portfolio at a major loss amid the Fed's decision to raise interest rates to levels unseen since the mid-2000s to try to get a grip on inflation.SVB's collapse led to two other financial institutions, Silvergate Bank and Signature Bank, going under. The contagion from the panic quickly spread across the Atlantic, with Credit Suisse bought out by UBS Group in an emergency deal brokered by the Swiss government to prevent the lender from going under.The situation stabilized after the US federal government vowed to reimburse uninsured depositors, and pumped $25 billion in cash into the banking system to avoid a further collapse.The banking crisis sparked by the Fed’s interest rate policy did not affect everyone equally. Last week, business media reported that banking giants including JPMorgan Chase, Citigroup, and Wells Fargo pocketed a cool $49 billion in earnings in the second quarter of 2023 after raising their base lending rates by several points above the Federal Reserve base rate of 5.25 percent.The close call comes amid the continued deterioration of the fiscal and economic health of the US and other G7 economies, with the West teetering on the brink of a major recession (and some European countries already in one) after trying to "punish" Russia for its military operation in Ukraine by restricting Russian energy exports. Successive US administrations' decision to pump trillions of new dollars in spending into the economy have further exacerbated the economic malaise, with the US narrowly avoiding a default last month after Congressional Republicans agreed to raise the debt ceiling. The US national debt now stands at over $32.6 trillion, with total debt reaching over $101.4 trillion, or about four times the country's total GDP.
https://sputnikglobe.com/20230616/deutsche-bank-says-us-destined-for-genuine-recession-amid-anti-inflation-efforts-1111230531.html
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banking, bank, fdic, federal deposit insurance corporation, taxes, fiddling, monkey around
banking, bank, fdic, federal deposit insurance corporation, taxes, fiddling, monkey around
US Regulator Accuses Lenders of Fiddling With Deposit Data After Banking Collapse Close Call
08:54 GMT 25.07.2023 (Updated: 09:10 GMT 25.07.2023) The US banking sector had a close brush with collapse earlier this year, with three commercial lenders going under after interest rate hikes by the Federal Reserve left many smaller banks on the brink of insolvency. Over the same period, banking giants including JPMorgan Chase netted a cool $49 billion in earnings by jacking up base lending rates.
The Federal Deposit Insurance Corporation (FDIC) has accused US banks of fiddling with deposit data to lower the amount they would have to pay under a new special tax proposed in the wake of this spring’s banking collapse close call.
In a letter to the CEOs of major lending institutions on Monday, the regulator
said it had “observed that some depository institutions” had “incorrectly” lowered the value of uninsured deposits – that is, deposits above the $250,000 which the FDIC automatically guarantees to return to bank clients if the financial institution goes bust. An estimated 56 percent of all deposits in the US are above this $250,000 figure.
The FDIC believes some banks may have tampered with deposit data in a bid to reduce how much they would owe in the
special assessment on “systemic risk determination” proposed in May.
Analysts with S&P Global, a New York-based financial information and analytics firm, have said that “an unusually large number” of major lenders appear to have amended their financial statements to reduce the amounts they would owe the FDIC by tens or even hundreds of millions of dollars, with some banks refiling their year-end financial statements to reduce uninsured deposit amounts.
At least 55 banks have reportedly restated their fourth-quarter 2022 data, compared with 14 a year earlier, with Bank of America amending its uninsured deposits figures by a whopping $125 billion, which would drop its special assessment payment from $2.26 billion to $1.95 billion. Smaller lenders like Huntington National Bank cut their uninsured deposit data by over $50 billion, a move that would save the lender $85 million in the assessment.
The FDIC has urged banks to adjust their financial statements, and demanded that bank executives personally confirm the accuracy of their filings. However, the FDIC did not single out any particular bank, and it’s unclear whether the open letter can be followed up by any legal action.
The open letter to banks comes amid reports late last week citing Fed data that some
$78 billion had been funneled out of the accounts of major banks between July 5 and 12 as lenders put cash into third-party intermediaries in a bid to attract new deposits.
The US banking system was rocked by a major close call in March, with California-based business lender Silicon Valley Bank collapsing as depositors rushed to get their money out after the bank was forced to sell its Treasury bond portfolio at a major loss amid the Fed's decision to raise interest rates to levels unseen since the mid-2000s to try to get a grip on inflation.
SVB's collapse led to two other financial institutions, Silvergate Bank and Signature Bank, going under. The contagion from the panic quickly spread across the Atlantic, with Credit Suisse bought out by UBS Group in an emergency deal brokered by the Swiss government to prevent the lender from going under.
The situation stabilized after the US federal government vowed to reimburse uninsured depositors, and pumped $25 billion in cash into the banking system to avoid a further collapse.
The banking crisis sparked by the Fed’s interest rate policy did not affect everyone equally. Last week, business media reported that banking giants including JPMorgan Chase, Citigroup, and Wells Fargo
pocketed a cool $49 billion in earnings in the second quarter of 2023 after raising their base lending rates by several points above the Federal Reserve base rate of 5.25 percent.
The close call comes amid the continued deterioration of the fiscal and economic health of the US and other G7 economies, with the West teetering on the brink of a major recession (and some European countries
already in one) after trying to "punish" Russia for its military operation in Ukraine by restricting Russian energy exports. Successive US administrations' decision to pump trillions of new dollars in spending into the economy have further exacerbated the economic malaise, with the US narrowly avoiding a default last month after Congressional Republicans agreed to raise the debt ceiling. The US national debt now stands at over $32.6 trillion, with total debt reaching over $101.4 trillion, or about four times the country's total GDP.
